Canadian Wholesale Revenues Pick Up in February

Following a lackluster start to the year, wholesaling activity in Canada picked up in February with higher sales of food and personal and household products accounting for much of the increase.
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Wholesale sales rose by  ; 0.8% to  ; $43.0  ; billion in February, reversing all of the  ; 0.7% decline posted in January. The most significant increase came in the personal and household goods sector (+4.0%), which resumed its upward momentum after a significant drop in January. The food, beverages and tobacco products sector also had a solid month (+2.4%), as did the automotive products (+1.9%) sector.
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These gains were partially offset by declines in the building materials (-2.2%) and other products" (-1.5%) sectors.
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Wholesalers in Quebec were the main beneficiaries of February's rise, with Ontario accounting for most of the remaining increase. Meanwhile, overall sales in the Prairie provinces were essentially flat during the month, while the Atlantic provinces gave back some of the large gains recorded in January.
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Overall price effects were minimal in February, as sales in constant dollars rose by  ; 0.9%.
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Personal and household goods sector bounces back
The personal and household goods sector resumed its upward momentum in February (+4.0%) after registering a significant drop (-4.6%) the previous month. Two of the three trade groups reported higher sales in February, with the only setback coming in the apparel trade group.
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The largest increase (+6.2%) came in the household and personal products trade group. This was the third rise in four months for this trade group, which had seen a substantial decline in January. Higher sales of personal care products and amusement and sporting goods were behind much of the February increase. A return to more seasonable winter conditions likely contributed to the increase in amusement and sporting goods' sales.
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It was a similar story for the pharmaceutical trade group, with February's increase (+4.5%) more than offsetting January's decline. The decline in January was in fact only the fourth since the start of  ; 2005  ; for this trade group, which continues to benefit from higher consumer demand for pharmaceutical products. According to the latest release of the Quarterly Retail Commodity Survey, annualized sales of prescription and non-prescription drugs increased  ; 11.0% and  ; 7.2% respectively in  ; 2006.
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February's decline (-4.7%) in apparel sales was the largest monthly drop since July  ; 2005, but this masks what has been a fairly solid performance in recent months, and even with the decline in February, sales were still substantially higher than a year ago. Sales in this trade group have been somewhat volatile of late as the normal seasonal patterns may have been affected by the late start to the winter in much of Canada.
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Food products sector increase the highest in almost two years
The food, beverage and tobacco products sector was boosted by stronger sales of food products (+2.7%), as sales of alcohol and tobacco (-0.2%) were little changed.
The increase in the food products trade group was the highest since September  ; 2005  ; and follows several months of declines after sales peaked in August  ; 2006.
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Large drop in lumber sales cools building materials sector
A large drop in lumber and millwork sales was the primary factor behind a  ; 2.2% decline in the building materials sector, which gave back nearly all of the gains it had made in January.
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The decline (-8.6%) in the lumber and millwork trade group followed a substantial increase (+11.8%) in January, with the milder than usual weather likely giving a temporary boost to sales. Prior to the large drop in February, lumber and millwork sales had staged a bit of a mini-rally

since hitting a two and a half year low last July, with increases in five of the six subsequent months. February's drop also coincided with a large decline (-14.1%) in lumber exports, which had also been on a bit of an upswing of late. Around  ; 30% of the lumber and millwork sold by wholesalers is exported.
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The other drop in this sector came in the metal products group (-3.9%), which had recorded a substantial increase in sales as recently as December. The sales trend for this trade group has been on a continuous upswing since August  ; 2005, with the strength of oil and gas activity in Alberta, coupled with unprecedented levels of construction in Western Canada, continuing to drive demand for metal products.
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The only growth (+0.4%) in February came in the building supplies trade group, which registered its third increase in the past four months. Wholesalers of building supplies continue to benefit from generally healthy levels of construction activity prevailing across the country.
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Most gains concentrated in Quebec
Quebec was the main beneficiary of February's rise, as sales in the province rose (+2.4%) for the third time in four months. Higher sales of food products and pharmaceuticals were behind much of the increase.
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Most of the remaining increase came in Ontario (+0.7%), which benefited from higher sales of automotive products and personal and household goods. Although total sales in this province have generally been rising over the past six months or so, there has been quite a bit of volatility in the monthly figures during this period. Much of this has been due to large swings in the automotive sector, which accounts for around one-quarter of all sales in the province.
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Wholesalers outside of Canada's two largest provinces did not fare so well in February. In the Prairies, overall sales were unchanged during the month, with a gain in Saskatchewan (+1.0%) offset by a decline (-1.9%) in Manitoba. Sales in Alberta were little changed (+0.1%) following a strong increase in January.
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Meanwhile, sales in the Atlantic provinces fell back after a strong start to the year, with all four provinces recording a drop during the month.
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Inventories remain unchanged in February
After rising by  ; 1.1% in January, wholesale inventories remained unchanged in February. Although  ; 11  ; out of  ; 15  ; trade groups reported lower inventory levels this month, these declines were completely offset by higher inventories of motor vehicles, "other products", pharmaceuticals and computers and other electronic equipment.
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The combination of higher sales and stable inventories meant that the inventory-to-sales ratio edged down from  ; 1.27  ; to  ; 1.26  ; in February. The ratio measures the amount of time (in months) that it would take to exhaust inventories at the current rate of sales.
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After rising steadily since November  ; 2005  ; to its recent peak last October, there has been a slight drop in the inventory-to-sales ratio over the past four months, with most trade groups showing a decline during this period.
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Release taken from www.statcan.ca